Worley: Middle East conflict costs mount as CP2 LNG backlog builds

Few ASX-listed engineering names have divided fund manager opinion as sharply as Worley Ltd (ASX: WOR) through 2025 and 2026. Endeavor Asset Management set out the original value case in July 2025, noting the share price had been weighed down by oil-price volatility and uncertainty over the timing of Venture Global's US$27 billion CP2 LNG development, where Worley is lead EPC contractor, an overhang that eased when Venture Global issued a full notice to proceed on the project's first phase.

A backlog rebuild takes hold

Through the back half of 2025, the backlog story firmed considerably. Elston Asset Management laid out the turnaround case in September, pointing to re-accelerating revenue growth across energy, chemicals and resources segments, margin expansion already under way, and a stock trading at 14 times next-twelve-month earnings, a 30% discount to the ASX 200 despite historically trading at a 5% premium. The fund's backlog figure of $16.9 billion, up 22% year-on-year and including CP2 LNG, became a widely cited reference point, with roughly 50% of it deliverable within 12 months.

The CP2 project clears its final hurdle

The CP2 LNG project itself progressed through a series of milestones. Pendal Group reported in February 2026 that Worley entered an agreement with Venture Global for CP2's second phase, potentially worth another $2 billion, pending a final investment decision expected in the first half of the calendar year. That decision came on 13 March 2026, and Pendal reported the stock rose 8% as Worley transitioned from providing engineering, procurement and construction planning services to a full reimbursable EPC contract, removing one of the last major sources of uncertainty around the project's economics for Worley.

Middle East conflict costs escalate through mid-2026

Just as the CP2 uncertainty cleared, a new headwind emerged. Pendal Group reported in April 2026 that Worley estimated the Middle East conflict would result in a $30-40 million negative hit to FY26 EBITA, given roughly 10% of its workforce is based in the region, though it framed the eventual repair and rebuild work as a meaningful longer-term opportunity. That estimate proved conservative: by June 2026, Pendal reported a second update showing the impact had grown to up to $60 million, with an additional roughly $50 million FX headwind from translation, a downgrade the market punished more harshly than the mid-to-high single-digit earnings impact implied.

An investor day lays out the long-term ambition

Worley used a May 2026 investor day to reset the medium-term narrative around growth rather than near-term disruption. Pendal Group reported management reiterated guidance, introduced an FY30 ambition for double-digit underlying medium-term EBITA compound annual growth from FY26, and announced a new $300 million buyback, while acknowledging near-term earnings risk from the roughly 10% of headcount exposed to the Middle East. ClearBridge Investments offered a similarly constructive medium-term framing in June 2026, arguing the backlog is rebuilding through projects like CP2 LNG and broader energy infrastructure demand, and that AI could actually benefit Worley's own margins by making its engineers more productive through embedded AI tools across its knowledge base.

Skeptics say cheap is not cheap enough

Not every manager has been won over. Spheria Asset Management, viewing the stock at under 10 times EBITA in June 2026, called it attractive given the medium to longer-term growth opportunities from regional pipeline investment and potential Middle East repair and rebuild work. But two managers speaking in July 2026 took the opposite view entirely. Maple-Brown Abbott's Dougal Maple-Brown said the fund has "a very high bar to buy something like Worley" given a history of contractor earnings holes appearing just after a run of good contracts, calling the stock a sell even after its latest downgrade. Alphinity Investment Management's Stephane Andre agreed, saying the stock is cheap but that cheap is not enough without evidence of earnings upgrades, arguing green energy economics remain far more challenging and that expectations have not yet been sufficiently rebased.

What managers are watching next

With Worley trading between roughly 12 and 13.5 times forward earnings through mid-2026, and management's own FY30 double-digit EBITA growth ambition now on the table, the catalysts fund managers are tracking are how quickly the Middle East conflict headwinds resolve into the repair-and-rebuild tailwind management has flagged, further backlog additions beyond CP2 LNG, and whether the company can deliver an actual earnings upgrade cycle rather than the repeated downgrades that have defined its FY26.